PharmExec Blog

Pharma Cheers Health Reform Legislation

Rally for Healthcare Reform
Image by SEIU International via Flickr

After months of increasingly rancorous debate, the House finally approved legislation March 21 that makes significant changes in the nation’s health care system. The Senate is slated to approve the House-passed changes to its original reform bill shortly.

Of most importance to pharmaceutical companies, the legislation promises to significantly expand the number of Americans with some kind of health care coverage. This will enlarge the market for prescription drugs and moderate pressures for price controls. The legislation sets up a scheme to eliminate the confusing and contentious “doughnut hole” in the Medicare program, while avoiding proposals for government negotiation of Medicare drug prices. Drug reimportation is off the table, at least for the moment.

A major plus for pharma is that the bill establishes a clear pathway for authorizing follow-on biologics. Brand-name firms won a 12-year data exclusivity period, despite loud protests from generics makers. But all manufacturers are likely to benefit from clearer policies on how to proceed in developing and regulating “biosimilars” and “biobetters.”

Pharmaceutical companies will finance the high cost of reform by paying additional fees and higher Medicaid rebates. Fees based on a company’s share of market are slated to total $28 billion over ten years, starting at $2.5 billion in 2011. The Medicaid rebate also increases from 15 percent to 23 percent.

The legislation reshapes the health insurance market as well as government health care programs, all promising to impact the coverage and delivery of prescription drugs. Implementation will be a huge challenge, especially for state governments. Republicans, as well as various interest groups, are already looking for revisions and challenges. We will examine these issues more fully in the next issue of Pharm Exec.

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3 Comments

  1. George Aubrey
    Posted March 25, 2010 at 8:23 am | Permalink

    On top of the high fees extorted from the industry, along with the higher rebates, we will face additional fees and possible price regulations down the road. The costs of this bill will be staggering and unsustainable. Many costs will be pushed down to the states in the long run. Both the Federal government and the state governments will be looking for more concessions from our industry in order to finance this bill.

    Health insurance companies will see their margins in a vice grip by being forced to cover high risk individuals at normal premiums and the Federal government restricting how much they can raise premiums. The Federal government won’t restrict the rebates they will be demanding from the industry in order to keep their business alive though. These initial charges are only a down payment on what will be a tremendous cost to our industry.

  2. Gary Lightfoot
    Posted March 25, 2010 at 8:27 am | Permalink

    Please tell me this positive comment from Pharma about the Health Care Bill was provided by a Spin Dr. not someone that has a basic understanding of the bill, Obama promisses or knowledge of price controls in most socialized medicine countries.

    This bill will reduce the quality of healthcare in so many expected ways and a few unexpected ways. I have lived in 3 countries for 9 years that provided my healthcare via a government program. The one word that describes this healthcare is PATHETIC. PRICE CONTROLS WILL COME BACK TO BITE YOU IN THE REAR. A promiss from this government is not worth the paper it is written on. I have over 40 years of experienance working for Pharma in management positions and am now retired.
    Gary – The Free Radical

  3. Darth Barrister
    Posted March 25, 2010 at 9:23 am | Permalink

    I disagree with the above posts to the following extent: First, while both the prospect of price controls and the radical alteration of the current health care landscape present challenges, other opportunities abound from the passing of this bill. As alluded to in the article, some provisions in the bill present pharma manufacturers with an opportunity to (1) expand the base of potential users (since theoretically, a new batch of previously un/under-insured people will now see prescribing customers) and (2) extend the brand life of some compounds. The companies that adroitly exploit the advantageous components of this bill will thrive.

    Second, let us not forget that the bill will not forever exist in its current form. There will be several iterations of it due to amendments and repeals which will undoubtedly occur in both the near and long term. It would be capricious to engage in doomsday histrionics at such an early stage.

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